Online and offline commerce on cusp of a convergence

Mobile devices, social media spur a major shift in e-commerce and traditional retail

SAN FRANCISCO -- Spurred by the growth of mobile devices and social media, we're on the cusp of a convergence between online and offline commerce.

That's the message from several industry executives speaking at this week's Web 2.0 Summit. As consumers use PCs, smartphones and tablets to research, compare prices and buy products, the line between brick-and-mortar and online stores is getting harder to delineate.

And that, industry watchers say, will make for some interesting times.

"The wall between retail and e-tail is crumbling fast," said John Donahoe, president and CEO of eBay , speaking at the Summit this week. "Consumers are driving enormous change in how they shop and pay. The lines [between online and offline shopping] are blurring as people use devices to find the best prices and who has the products they want before they hit the road."

Donahoe contends that over the last 12 to 18 months, in more than half of non-insignificant purchases today, consumers access the Web. And increasingly they're accessing the Web while they're standing in the store.

"When we go look at consumer behavior, they use devices in their shopping experience ," he added. "We ask what devices they used -- PCs, smartphones -- and they say, 'I don't know. I was just shopping.' "

Dan Schulman, group president for enterprise growth at American Express, also told the Summit audience that the distinction between online and offline is blurring.

"I think in the future, certain as we're all carrying the Internet with us, we all will have the same information overlay in front of us," he added. "The only difference will be if I reach out and grab that product now or will I have it shipped to me."

Schulman was speaking at the Web 2.0 Summit on Tuesday, along with John Partridge, president of Visa Inc.

While the two companies compete on a global scale, they clearly agree that dramatic changes are afoot in both e-commerce and traditional offline shopping.

Partridge, who is responsible for Visa's technology, noted that 46% of online transactions use Visa, and PayPal is the company's second-largest merchant. "There is this convergence of mobile and e-commerce in the social networks," he told the audience. "Over the coming years, that convergence is going to continue to happen."

This change in how people make purchases has been coming for a while, analysts said.

People have been buying old teapots on eBay and books and shoes on Amazon.com for years. This oncoming shift is being pushed forward by the burgeoning use of mobile devices and apps that enable people to find better ways of not only buying things but of comparing prices when they're in a store, tapping into reviews and finding out what their social networking friends have thought of the same products.

"They are providing ways for better impulse buying, ways to connect multimedia ads to fixed ads and displays, and location-based promotions that can bring people into stores to buy who otherwise might have walked away," said Rob Enderle, an analyst with the Enderle Group. "They are changing the face of buying, and the retailers that aren't adopting quickly enough are being left rapidly behind."

And while location-based services, like the immensely popular Groupon , are helping bring people into offline stores, online shopping still is taking a toll on traditional shopping, according to Mary Meeker, a partner at the Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers.

A speaker at the Web 2.0 events and a well-known venture capitalist and former Wall Street securities analyst, Meeker noted in a presentation this week that e-commerce has shown four quarters of accelerating growth. E-commerce is doing so well that it's taking growth away from traditional media.

Meeker added that the top reason consumers abandon in-store purchases is because they find the product at a better price online. "Transparency and mobile are making a huge difference in commerce," she said.

Mark Benioff, CEO of enterprise cloud computing company Salesforce.com, said Facebook and social networks are making a distinctive change in commerce.

Benioff noted that Coca-Cola has had more than 30 million people "like" its Facebook page, but when one of them walks up to a Coke vending machine, the machine doesn't recognize them or their social profile, and it should.

"They could have an app that gives you loyalty points for following the company and buying their soda," he said. "We need to make more linkage between what's going on in our companies and in the social world."

Enderle said changes to the world of commerce are coming swift and sure. And the way consumers make purchases will continue to shift in the coming years.

"More of [our purchases] will be online and automatic," he said. "We'll have trusted relationships with a large number of vendors or agents that likely don't even exist today who will be expert at meeting our unique needs."

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